Tuesday, December 18, 2012

Climateer Line of the Day: I'm All Atingle About Tax Policy Edition

I know it's early but who is going to top this:

"International transfer pricing might not win any awards for Sexy Topic of the Year..."

From FT Alphaville:

International transfer pricing might not win any awards for Sexy
Topic of the Year, but it’s what’s at the heart of the debate around low
corporate tax payments by the likes of Starbucks, Amazon, and Google.

To explain why, consider Mr Potato Head:

Let’s say Mr Potato Head is owned by Toy Corp, USA (for the avoidance
of doubt — we’re making this up for the purposes of this example).
Additionally assume that he’s assembled on US soil with locally sourced
parts. He’s exclusively sold to the domestic market.

In such a simple scenario, all of the revenues and costs of Toy Corp
would arise within US borders and the Internal Revenue Service would no
doubt receive its fair share of tax.

Let’s take over the world
Things can quickly get complicated when Toy Corp launches foreign operations.
Say Toy Corp wants to branch out to the European market. To assist this, the company opens a subsidiary in the UK.

Now imagine that most of the world’s plastic nose trading occurs in
Switzerland. After being purchased by Toy Corp’s Swiss employees, the
raw noses are shipped to the Netherlands for painting.

Also worth mentioning — the blueprints for manufacturing Mr Potato
Head (potato body plus parts) are ‘owned’ by another Toy Corp company.
That one is in the Cayman Islands....MUCH MORE